A comparison of corporate tax rates, tax incentives, tax treatment of foreign sourced income and indirect tax rates between the UK and Singapore reveals that relocating to Singapore is an attractive option for UK companies and entrepreneurs.
Singapore, September 09, 2009 - A recent analysis of taxes in Singapore and UK reveals that UK based companies and entrepreneurs can gain excellent tax advantages by relocating to Singapore. The study on how businesses are taxed in UK vis-a-vis Singapore, has brought out interesting results, with striking contrasts between the two jurisdictions.
According to the study, Singapore has a single-tier territorial based flat-rate corporate income tax system with one of the lowest effective tax rates in the world. Singapores corporate income tax rate of less than 9% for profits up to S$300,000 and flat 17% above S$300,000 stands in stark contrast to UKs corporate tax rate of 28% for companies with profits over 1.5 million GBP and 21% for small companies with profits of 300,000 GBP or less.
Moreover, Singapores single-tier tax system ensures that tax paid by a company on its profits is the final tax and all dividends paid to its shareholders are exempt from further taxation. UK on the other hand, taxes its individuals at 10% for dividend income at or below 37,400 GBP and 32.5% for dividend income above 37,400 GBP.
The study reveals that Singapores taxation policy regarding foreign sourced income is also an area where it gains an upper hand over UK. Singapore resident companies are taxed only on income that arises from Singapore or remitted into Singapore. In comparison, UK resident companies are subject to corporate tax on their income, irrespective of where they arise. Foreign-sourced dividends and foreign branch profits are taxable in UK but not in Singapore.
"When tax time rolls around, you can hear the collective groan of all the businesspeople who have to start sorting their financial records and finding out just how much theyre going to have pay the government this year. By keeping tax rates low, Singapore continues to attract a good share of foreign investment including small-to-midsize firms and entrepreneurs from around the world.", said Andrew Chen, a spokesperson from the Singapore Company that released the tax analysis report.
Although the principles of indirect taxation are very similar all over the world, there are certain significant differences between UKs VAT and Singapores GST. A UK resident company must register for VAT when its taxable turnover for a year is above or expected to be above 68,000 GBP. The VAT rate is 15%. Singapore resident companies must register for GST when the annual turnover is above or expected to be above 1 million SGD. The GST rate in Singapore stands only at 7%.
Based on the study, its clear that with a lower corporate tax, Singapore will continue to be an attractive relocation option for UK based companies and business professionals.